Question: There are at least three different purposes for which we measure product costs. They are (1) product mix decisions, (2) determining the appropriate charge for
There are at least three different purposes for which we measure product costs. They are (1) product mix decisions, (2) determining the appropriate charge for a government contract, and (3) preparing financial statements for external reporting following GAAP.
Requirement
In the following table, indicate whether the respective type of cost would be included or excluded for the particular purpose.
(Assume the product design costs have already been incurred.)
| Type of Cost | Purpose: Product Mix | Purpose: Government Contract | Purpose: Financial Statement (using GAAP) | ||
|---|---|---|---|---|---|
| Direct material | Include | Include | Include | ||
| Direct manufacturing Labor |
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| Manufacturing overhead |
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|
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| Distribution costs |
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| Product design costs |
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| R&D Costs |
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| Customer service | Include | Exclude | Exclude |
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